What does one mean by margin expansion..?? and how does it drive up the EPS??

Question

What does one mean by margin expansion..?? and how does it drive up the EPS??

Answer 1

Margin expansion refers to increasing the margin of profit a company is generating. For example, if intel has a profit margin of 49.5% on its chips, and next quarter it has 50.5% margin, there is a 1% margin expansion and that is considered to be good because it means there costs are either going down, and/or they are able to raise prices.

It's good for EPS, because the net effect is increase earnings due to the higher profit, and subsequently higher EPS which is usually rewarded in a higher stock price.